These targeted amendments have been issued to help companies better report the financial effects of nature-dependent electricity contracts, which are often structured as power purchase agreements (PPAs). The IASB acted swiftly in the light of the increased use of these contracts.

Nature-dependent electricity contracts help companies secure their electricity supply from sources such as wind and solar power. The amount of electricity generated under these contracts can vary based on uncontrollable factors such as weather conditions. Current accounting requirements may not adequately capture how these contracts affect a company’s performance.

To allow companies to better reflect these contracts in their financial statements, the IASB has made targeted amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. The amendments include:

• clarifying the application of the ‘own-use’ requirements;
• permitting hedge accounting if these contracts are used as hedging instruments; and
• adding new disclosure requirements to enable investors to understand the effect of these contracts on a company’s financial performance and cash flows.

Effective date and transition

The amendments are effective for annual reporting periods beginning on or after 1 January 2026. Early application is permitted.

The amendments shall be applied retrospectively; prior periods need not be restated to reflect the application of the amendments.